IOH surges on MinRes deal PDF Print E-mail
THE WEST AUSTRALIAN   
Thursday, 28 February 2013 14:34

Shares in Iron Ore Holdings surged after the company announced a mine gate sales deal with Mineral Resources which will expedite the development of its Iron Valley project.

 

 

Under the terms of the deal, IOH will effectively outsource the development and operation of the mine to MinRes, with the latter buying a minimum tonnage from IOH at the mine gate.

IOH said MinRes would develop the mine at its own cost within six months of IOH securing final mining approvals, expected later this year.

The detailed terms of the mine gate purchase price and minimum annual tonnes would remain confidential.

However IOH said the mine gate payment price and minimum tonnage purchase obligations had been structured to protect both parties from downside operational and economic risks, while ensuring they would also share in the upside of higher iron ore prices.

IOH would remain the tenement owner and make statutory payments to third parties including the State Government.

The company said the arrangement could deliver average annual EBITDA of $20-$75 million, based on production of 4-6mtpa, an iron ore price of $US90-$US110 million and an exchange rate of $1AUD:US$0.93.

Managing director Alwyn Vorster said the transaction was aligned with IOH's strategy of limiting its capital cost exposure and adding value through the de-risking of quality projects.

"The Iron Valley commercialisation result is another major milestone for IOH and the transaction validates the company's long held assessment that the Iron Valley project, by itself, has a higher asset value than the value attributed to our entire company by the market in recent times," he said.

MinRes managing director Chris Ellison said the agreement further cemented the company's presence in the Pilbara iron ore region and provided the opportunity to expand its iron ore business.

"The IOH agreement provides MRL with access to a substantially increased resource base in the region complementing its current iron ore and manganese operations," he said.

 

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Iron Ore Holdings



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